Victor Niederhoffer

[survivor]

One of the greatest traders of our time and a gentleman.

Some of his main concepts which I have abbreviated:


1. Always use the scientific method...not mumbo-jumbo,hocus-pocus and abracadabra.

2. Never get in over your head.

3. Don't trade wthout backtesting. Whatever that CAN be tested MUST be tested.

4. Never use fixed systems. Systems must be flexible.

5. Cycles are always ever-changing. Adaptation of the trader is critical, don't be rigid.

6. Fish where no one else does.

7. The main theme of the markets is DECEPTION.

[survivor]

One more critical rule:

8. Always have a couple or more escape routes. Don't have only one.

[Teepo]

This fella bet on the wrong horse and lost everything back during the Asian Financial Crisis, right?  Is he back?

I remember when he went down, George Soros was extremely surprised as Soros rates Victor Niederhoffer as one of the best traders around....

[survivor]

I might as well round it off to 10.

So, here goes:

9. All the world markets {Equities, bonds, currencies, commodities} are interrelated.
    The trick is to find out how, subject to the above 'ever-changing cycles' principles.

10. Be humble.

[survivor]

Nuts, i forgot one MAJOR idea from him:

999. The base of most indicators is, of course, PRICE, but the most neglected variable is TIME.

[survivor]

Yes, He says so himself:

He bought the Thai bank stocks, during the last financial crisis, when the stock was down 90% from the highs. He says, how on earth can a Government owned bank got to zero when it is already 90% off its highs? Well, it went to zero.

Further he bet wrongly in the following debacle in the SP futures 'the so-called asian contagion'.

He lays the blame squarley on himself, the main reason being not being humble enough.

You see, he had the best track record of all money managers for the last 20 years before 1997.

He tried to 'recover' his thai losses by going 'over his head' in the SP500 futures.
{Remember this is a guy who never had a losing month in the last 20 years}


Yes he is back, since 2000, and again he has the best track record of ALL  money managers,
as I had mentioned in an earlier post:

Monthly Draw down = ZERO.

Sharpe Ratio = 6.0    ie.  {SIX! Mere mortals like me cannot come close to 1.0 even }

Profits 30% per Annum.


No other hedge fund manager {manging over USD 50 Million}even comes anywhere close.

[survivor]

Ok, just one more:


1000. Always try to take on a little more risk.

[bizfun]

Hi survivor,

Always list the expert rules here, hope not adding your personal rules. I will do editing later, so I will just keep the important guidelines here for all readers. If you have disscussion about this expert strategy, open new topic at "Trading Strategy...." to continue discussing.

Read my annoucement in this forum.

Thanks for cooperation.

[survivor]

Mr. Bizfun: "......hope not adding your personal rules"

Hi BizFun,

If I may clarify, the rules I have listed are, in fact, Victor Niederhoffer's concepts,
certainly not mine. Each one stated very clearly in his two books as I have mentioned in the other 'Books' forum.

If my posts and the 'rules' above seem the same, then it is because I am a student and keen follower of his methods....regretfully without his stellar results!

I hope this clarifies the matter.

Best.

[bizfun]

Sorry, I thought you add personal rules because it come to rules number 999 then 1000.  #-o

It is okay, thank you very much.

[bizfun]

Hi, suvivor, what is the meaning "Sharpe Ratio = 6.0 ie. {SIX! Mere mortals like me cannot come close to 1.0 even }"?

[survivor]

Bizfun:

"...rules number 999 then 1000"

A small joke!
-----------------------------------------------------------------------------------------------------------
Bizfun:
"what is the meaning "Sharpe Ratio = 6.0 ie. {SIX! Mere mortals like me cannot come close to 1.0 even }"?

Sharpe ratio is named after one of the most famous professors of Finance in the US.
It is the measure of the 'steadiness' of the returns of a trading strategy/trader/Fund manager/fund.

Mathematically it is = {Average return} / {standard deviation of returns}

The standard deviation (SD) is a statistic =

Square root of [Sum{(item - average)^2}/ n] : {use excell function STDEV if you want to try}
eg.

Let us assume that the results of the past 10 {for the case of this simple example only. In actual fact one would consider atleast 30 minimum for the system and perhaps past 3 years trades as a minimum for the trader} trades are;

Trader A:

-5, +10, -2, + 10,-3, +8, +9, +3, -6, +2
Total = 26
Avg = 2.6
SD = 6.4
Sharpe ratio = 2.6/6.4 = 0.4

Trader B:

-1, +4, -1, +6, -2, +7.5, +5.5, +7, -1 , +1

Total = 26
Avg = 2.6
SD = 3.8
Sharpe ratio = 2.6/3.8 = 0.70

Both traders have the same average pts/trade  but the trader A has profits an losses which are much more 'variable' than trader B. Hence, in mathematical terms, Trader B is the better trader.

Common sense would dictate that one would more likely entrust his money to somebody who is 'steady' rather than some one whose results are varying much more, even if the results are same. The above is the mathematical justification of his 'common sense'.


Now can you imagine Sharpe Ratio = 6.0?

[fiver]

Nuts, i forgot one MAJOR idea from him:

999. The base of most indicators is, of course, PRICE, but the most neglected variable is TIME.

Granville (on balance volume) did put it in exact same words, but he certainly did say TIME was the mother of all indicators.